Role of clauses

Definition

1. (term being defined + is + definition)

 Equity is the owner’s residual interest in the assets of a business after deducting liabilities.

 A trial balance is a list of accounts and their balances at a point in time.

2. (term being defined + refers + to + definition)

 A note payable refers to a formal promise, usually denoted by the signing of a promissory
note, to pay a future.
 Unearned revenue refers to a liability that is settled in the future when a company delivers its
products or services.

3. (terms being defined + are + definition)

 Assets are resources owned or controlled by a company, and those resources have expected
future benefits.

 Liabilities are claims (by creditors) against assets, which means they are obligations to transfer
assets or provide products or services to others.
 Creditors are individuals and organizations that have rights to receive payments from a
company
 Accounts receivable are held by a seller and refer to promises of payment from customers to
sellers.

4. (term being defined + is + defined+ as +definition)

 The cost of buildings located on the land is separately recorded in one or more building
accounts

Function

 A T-account represents a ledger account and is a tool used to understand the effects of one or
more transactions.

 A trial balance is used to confirm this.

Properties/ Characteristic

 Instead, an account is assumed to have a normal balance.

Classification

Composition

1. (term + includes + composition)

- Office supplies include stationery, paper, toner, and pens.

- Store supplies include packaging materials, plastic and paper bags, gift boxes and cartons,
and cleaning materials.

- Office equipment includes computers, printers, desks, chairs, and shelves.

- The Store Equipment account includes the costs of assets used in a store, such as counters,
showcases, ladders, hoists, and cash registers.

2. (terms + are + composition)

- The accounts are grouped into three major columns corresponding to the accounting
equation: assets, liabilities, and equity.
3. (term + is + composition)
- Information from an account is analyzed, summarized, and presented in reports and
financial statements.
- An account is a record of increases and decreases in a specific asset, liability, equity,
revenue, or expense item.

Who : Buildings such as stores, offices, warehouses, and factories are assets because they provide
expected future benefits to those who control or own them.

Which : The beginning capital balance in January 2016 is $33,195, which is December 2015’s ending
balance.)

How : Relying on source documents, the trans- actions and events are analyzed using the accounting
equation to understand how they affect company performance and financial position.